This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.
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You need to know
This is the total value of all trading stock on hand at the end of the year. The amount that is shown at Closingstock is the total of the value of each item of trading stock calculated for tax purposes under section 70-45 of ITAA 1997.
Trading stock is anything you have on hand which you produced, manufactured, acquired or purchased for the purpose of sale, manufacture or exchange. For example, trading stock includes livestock but not working animals (except those used by a primary producer), crops and timber when harvested and wool after it is removed from the sheep.
Manufacturers must include as trading stock partly manufactured goods and materials on hand. However, closing stock excludes any amount that represented closing stock of a business that ceased operations during the year. This amount is included in Otherbusinessincome at I or J in the Incomesection of item P8. For more details about what constitutes trading stock, visit our website or phone the Business Infoline on 13 28 66.
You can choose one of the following three methods to value your trading stock:
- market selling value
- replacement value.
You may elect to value an item of trading stock below the lowest value calculated by any of these methods because of obsolescence or other special circumstances.
The value you elect must be reasonable. Where you elect to value an item of trading stock below cost, market selling value and replacement value, you must complete item P19 on your schedule.
You may use different methods to calculate each item of trading stock in different years or for different items in the same year. However, the opening value of each item in a particular year must be the same as the closing value for that item in the previous year.
If you are registered for GST, the value of closing stock should not include an amount equal to the input tax credit that would arise if you had acquired the item solely for business purposes at the end of the income year. Input tax credits do not arise for some items of trading stock, such as shares.
If you are a primary producer, you must add the value of your closing stock from your livestock account at PP3 on your primary production worksheet to the value of your closing stock from your produce account at PP8 on your primary production worksheet.
The total of these amounts is the total value of your primary production closing stock.
As the tax values of closing stock on hand are shown at PP3 and at PP8 on your primary production worksheet, you cannot reduce these values by accounting entries. Keep records showing how each item was valued.
Completing this item
Step 1, Work out the value of your primary production closing stock. If you have more than one business, add up all your primary production closing stock values.
Step 2, Write the total value of your primary production closing stock at Closing stock in the Primary production column, item P8 on page 3 of your schedule. Do not show cents.
Step 3, Work out the value of your non-primary production closing stock. If you have more than one business, add up all your non-primary production closing stock values.
Step 4, Write the total value of your non-primary production closing stock at Closingstock in the Non-primaryproduction column. Do not show cents.
Step 5, Add up your primary production and non-primary production closing stock values and write the total at M.
Step 6, From the list below, find the letter that matches the method you used to value closing stock. If more than one method was used, select the letter that applies to the largest value:
- C, cost
- M, market selling value
- R, replacement value.
Step 7, Print the letter in the type box at the right of the amount at M.
Last modified: 01 Sep 2006QC 18499